Are US Retirement (IRA) or Foreign Retirement FBAR Reportable?

Are US Retirement (IRA) or Foreign Retirement FBAR Reportable?

FBAR Requirements For US Retirement (IRA) and Foreign Retirement

With the US government still moving full steam ahead on enforcing matters involving foreign bank and financial account reporting (FBAR), it is important for taxpayers who may have an FBAR filing requirement to have a basic understanding of what types of foreign financial assets are reportable on FinCEN Form 114 (“FBAR”). One common type of foreign account is a foreign pension/retirement account. For example, a taxpayer may have an Australian Superannuation, a Singaporean CPF or a Hong Kong MPF. Since oftentimes the value of these pension/retirement accounts may be substantial, it is important to understand whether or not these types of retirement accounts are reportable –– as well as whether US-based retirement accounts such as IRAs (that contain foreign assets) are reportable as well. Let’s go through the basics of FBAR reporting for US retirement and foreign retirement accounts.

Foreign Retirement Accounts Are Reportable

The FBAR instructions and the updated IRS Publication 5569 are straightforward when it comes to reporting foreign pension accounts. When a person has a foreign pension account (such as the type of accounts indicated above), then those types of retirement accounts are considered financial accounts that are required to be disclosed on the annual FBAR.

As provided by the IRS:

      • Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican Administradoras de Fondos para el Retiro (AFORE) are foreign financial accounts reportable on the FBAR.

US Retirement Accounts With Foreign Accounts

This is where it can get a bit complicated, due to some of the terminology used in this area of tax law. In general, a qualified retirement account such as an IRA is not reportable for FBAR purposes. This is true, even if the IRA contains foreign financial account as a pooled fund. It is also important to note that a ‘financial account’ is not limited to bank accounts and can include pooled funds such as ETFs or mutual funds. Thus, if a person owns a foreign mutual fund outside of the US pension plan, then that type of account is reportable, but if the pooled fund is held within a qualified US retirement plan such as an IRA, then it is not reportable. In other words, as long as the foreign account or fund is held within a qualified retirement plan, then the specific foreign asset contained in the qualified plan does not need to be segregated and reported on the FBAR.

As provided by the IRS:

The following persons are excepted from the FBAR filing requirement:

      • Individual Retirement Account (IRA) owners and beneficiaries. An owner or beneficiary of an IRA located in the U.S. doesn’t need to report a foreign financial account held by or on behalf of the IRA.

      • Participants in and beneficiaries of tax-qualified retirement plans. A participant in or beneficiary of a retirement plan described in Sections 401(a), 403(a), or 403(b) of Title 26 of the United States Code (Internal Revenue Code) doesn’t need to report a foreign financial account held by or on behalf of the retirement plan.

Missed Reporting Retirement Plan on FBAR?

If you missed reporting a foreign retirement plan on the annual FBAR, there are very safe methods for getting into compliance depending on your specific facts and circumstances. This type of reporting of late disclosure is referred to as Offshore Amnesty and you should speak with a Board-Certified Tax Law Specialist who specializes exclusively in this area of tax law to get an understanding of what your options are.

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Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

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